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Hot stock update: Noble slumps after Moody's downgrade to junk

Wednesday, December 30, 2015 - 09:59
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SHARES of beleaguered commodities trader Noble Group took an immediate hit at the opening bell on Wednesday after it was downgraded to junk status overnight by credit rating agency Moody's.

The stock opened a cent lower at S$0.43 and slid further. It fell by as much as 5.7 per cent or 2.5 Singapore cents to S$0.415 in early trading and was the most heavily traded stock on the local bourse with about 16.3 million shares having changed hands as at 9.45am.

The stock continues to hover near its lowest levels in more than five years. Its 52-week low was S$0.38 on Oct 6.

With the latest decline, the stock has lost more than 60 per cent year-to-date.

Moody's cut its rating for Noble's senior unsecured bonds from Baa3 to Ba1, which is below investment grade, on Tuesday citing concerns over the group's liquidity, profitability and cash flow. It also gave Noble a Ba1 corporate family rating.

This came after Moody's said on Nov 16 that it was reviewing its rating of Noble for a potential downgrade. S&P also said on Nov 23 that it was placing Noble's BBB- rating, the lowest investment-grade debt score, on review with negative implications. Fitch said on Nov 20 that while Noble Group's liquidity was just enough to support its BBB- rating, any deterioration would likely trigger a negative ratings action.

Noble said in a press release on Wednesday morning that while it respected Moody's decision, it believes its rating metrics "will substantially exceed those required of an investment grade credit" once it closes its deal to sell off its agricultural trading unit Noble Agri.

It added that it was "confident that the deal will be approved by our shareholders and will close before the end of February ... It is unfortunate that this transaction has seemingly, in our view, been outweighed by Moody's negative view of the commodity producer segment".